The Economic Exploitation of Black Americans
By John Broadway
As Americans engage with Black history this month, we want to take time to honor and understand how the economic exploitation of Black Americans has shaped much of this nation's history. In this blog post, we're taking a look at the many forms this economic exploitation has taken throughout American history and what they teach about the issues we face today.
Original Sin
Let's go back to the 17th century when American colonies began codifying racialized "slave codes," laws that stated, among other things, that anyone whose mother is a slave shall be relegated to slavery for life. Then, to quell a growing abolitionist movement, proponents of slavery proliferated the ideology of white supremacy - backed by racist pseudo-scientific theories like phrenology, for one. Proponents of slavery wielded White supremacy to justify the, according to one recent estimate, approximately 5.9 to 14 trillion dollars worth of unpaid labor stolen from enslaved Africans.
White supremacy helped mold a racial hierarchy that remains entrenched today and continued the economic exploitation in new forms following the abolition of slavery.
The “Reconstruction” of Stolen Labor
The Reconstruction Era was supposed to remedy the sins of slavery. But Emancipation decimated the South's economy. As a result, throughout this era, the South “reconstructed” its methods for stealing labor and wages from Black Americans as a means to prop up the economy.
During Reconstruction, the South instituted Black codes, which, among other things, criminalized the free movement of African-Americans. These codes were so intentionally oppressive that some statutes were lifted directly from the slave codes, merely replacing the word "slave" with "freedman." The convict leasing system — another thinly veiled extension of slavery — capitalized on Blacks' targeted criminalization by leasing convicts to plantation owners for unpaid labor.
Wage Theft
Immediately after the Civil War, many former slaves established subsistence farms on land abandoned by fleeing white Southerners. President Andrew Johnson, a Southerner and former slaveholder, restored this land to its white owners, which reduced many freedmen to economic dependency.
Seeking autonomy and independence, the freedmen refused to sign contracts that required gang labor, and sharecropping emerged as a compromise. Landowners divided plantations into 20- to 50-acre plots suitable for farming by a single-family. In exchange for the use of land, a cabin, and supplies, sharecroppers agreed to raise a cash crop and give a portion (typically half) of the harvest to the landowner. Landowners extended credit to sharecroppers to buy goods and charged high-interest rates, sometimes as high as 70 percent a year, creating a system of economic dependence and poverty.
The debt to the landowners compounded year after year until there was no way to ever repay it, which tied sharecroppers to plantation lands without an option to leave. This vicious cycle essentially turned sharecropping into another form of servitude, and generations of families were impoverished under Jim Crow Laws, restricting mobility, forcing many African-Americans to remain under the thumb of these exploitative practices.
Freedman's Bank Beaufort South Carolina. Courtesy of The Library of Congress
Stolen Money
Entering the Reconstruction Era, no proper financial compensation for the massive debt owed to African-Americans materialized. However, in 1865 Congress created the Freedman's Saving Bank to offer a semblance of economic assistance to the newly freed Blacks.
Although well-intentioned, the bank eventually devolved into yet another form of exploitation. Frederick Douglass, who was recruited to serve as the bank's president to save it, described the bank as "the black man's cow but the white man's milk."
The bank devolved into an institution that robbed Black Americans of access to their own money and financial services.This was the result of a number of factors. There was little to no oversight of the bank by Congress; and,contrary to what the bankers led their customers to believe, the bank's assets were not protected by the federal government. This policy became problematic when the bank's trustees, all of whom were white, convinced Congress to amend the bank's charter, allowing it’s trustees to invest bank funds in risky stocks, bonds, real estate projects, and unsecured loans. The trustees would regularly offer risky loans to friends - some with no collateral. Some of the trustees were in charge of other banks as well, and when they made terrible loans at those banks, they transferred the bad loans to the Freedman's Saving Bank. Corruption all around.
The bank formally closed in 1874, costing 72,000 depositors an estimated total of $57,000,000. Moreover, the bank's failure caused feelings of bitterness, betrayal, abandonment, and distrust of the American banking system that still linger within the African-American community.
Stolen Opportunity
Moving into the 20th century, more insidious forms of economic exploitation developed. An often discussed form of economic oppression that hugely impacted Black Americans was redlining: the discriminatory pattern of disinvestment and obstructive lending practices that impeded homeownership for African-Americans. Federal housing agencies determined which neighborhoods were “unfit” for investment by banks, insurance companies, savings and loan associations, and other financial services companies. Bankers would place red lines on maps around areas where African-Americans lived and would-be homeowners who lived in these neighborhoods. These practices caused neighborhood economic decline and the withholding of services or their provision at an exceptionally high cost.
Neighborhoods that local banks deemed unfit for investment were left underdeveloped or in disrepair due to redlining. Financial institutions obstructed attempts to improve these neighborhoods with business ventures by labeling the underwriting as “too risky.” When existing businesses collapsed, new ones were rarely allowed to replace them.
Consequently, African Americans neighborhoods had limited access to banking, healthcare, retail merchandise, and even groceries.
The different methods to oppress and deny opportunity to Black Americans show us that economic exploitation is the root cause of the entrenched racial hierarchy in America. These examples of economic exploitation are a roadmap for the injustices that must be addressed to truly achieve Black liberation and economic independence.
The Freedman's bank's failure teaches us that populations should have equity and ownership of initiatives aimed to uplift them. Economic development initiatives like the Bank cannot be successful without policies in place to protect stakeholder interest. Without these protections, we risk a continuing pattern where solutions meant to improve Black lives devolve into new forms of exploitation and stolen opportunity
In a follow-up article, I will discuss how the exploitation of Black economic opportunity sparked a variety of ideologies that shaped the fight for economic justice throughout the 20th century.